Small and medium-sized enterprises (SMEs) are a critical component of an inclusive economy, they encourage the growth of jobs and wealth and they have always been the true heralds of innovation. However, SMEs have less access to finance and tend to struggle the most during times of uncertainty. And can you honestly name a more uncertain time in recent memory?
So, in the wake of the pandemic and what it’s done to the economy, what can be done to encourage, promote and support the growth of SMEs in 2021 and beyond?
Promote their importance
It cannot and should not be understated how valuable SMEs are to the economy. Without them, we’d be living in a world where we would almost be forced to turn to Amazon for our every want and need. And that’s surely a world none of us wants to live in?
So, SMEs should be held up by all and as the great drivers of productivity that they are. That means cultivating a culture that helps them thrive.
Why are SMEs so diverse and productive? Well, the fact is that a human can only comfortably maintain a maximum number of social connections. In a large company, ones personal network is only ever a small fraction of the vast workforce. The employee can sometimes feel like a drop in the ocean, a single cog in a big machine.
Whereas in a small business, it’s possible for an individual to know every that works for the company, and see how the quality of their own work helps the entire team. This is a motivator which encourages employees to take responsibility and do things correctly rather than trying to ‘coast’ through their job.
Changing policies to help support SME growth
The one thing the government can do (besides extending the furlough scheme) to help SMEs in this time of great need is to alter existing policies to favour SME growth. This means creating small business tax incentives and changing policies to allow easier business registration and to ensure they can access new opportunities.
SMEs make up around 98% of businesses in the UK so they cannot afford to be ignored. While the government has pledged to spend £1 in every £3 with SMEs, directly or through the supply chain, by 2022, there’s always more to be done.
Examples of policy changes which could benefit SMEs include:
Reducing the corporate tax rate on business profits for smaller companies. To read more about corporate taxes for small businesses, check out the best corporate tax textbooks.
Reducing the cost of licenses, permits and regulatory fees to bring down the ‘cost of doing business’ overhead. These regulatory costs inflate the cost base of every business in given sectors. This hinders the ability of micro-businesses to compete with larger corporate groups who can easily absorb the flat rates for such licenses.
Access to funding
Without a decent amount of startup capital, even an SME with the best ideas, inventions and innovations in the world will not get anywhere. There are dozens of options SMEs can explore regarding capital generation; from unsecured cash flow finance to seeking investors. These avenues need to be opened up to more struggling businesses so they can have a chance to make an impact.
To discover more about finance, take a look at the best finance books we’ve shortlisted for your attention.
Global trade environment
It’s no great secret that Brexit has turned into a bit of a joke and the UK are very much the brunt of that joke right now. But let’s not let that mismanagement get in the way of global trade opportunities. At a time when everyone in the UK is looking down their noses at international trade (particularly with Europe), we should instead be looking at ways to promote global trade. That means perhaps looking beyond Europe and the US to markets in Asia and the Middle East; developing nations where there is still a lot of work to be done in shaping western influence.
Look up and look outwards, because if a business only ever looks for domestic trade it will soon find itself hitting the glass ceiling. Scaling up an SME takes time, skill and the right environment. So let us all help foster that environment together.